Three Risks To Mortgage Rates in 2018

A lot of my clients ask me where interest rates for mortgages are heading. Although I don’t have the proverbial “crystal ball,” mortgage rates have been relatively low for quite some time now. Here are three things that may cause rates to move higher in 2018:

1 – Unwinding of the Fed’s Bond-buying Program

Since 2009, the Federal Reserve has purchased a staggering $1.7 trillion of mortgage bonds, and they’ve been the largest buyer of bonds in the market. This has had the impact of keeping interest rates very low. In October 2017, the Fed began reducing their bond purchases, and they expect to phase out their bond-buying program throughout 2018 gradually. This may cause mortgage rates to go up.

2 – Growing Federal Government Debt

The growing level of federal government debt will lead to an increased supply of Treasury bonds hitting the market. This significant increase in bond supply will take place simultaneously with a substantial reduction in bond demand that is resulting from the unwinding of the Fed’s bond-buying program as described earlier. This could cause interest rates to go up in 2018.

3 – Economic Growth

When there’s positive economic news, stock prices tend to improve, and interest rates tend to get worse. Recently, we’ve had many positive economic reports that indicate a stable jobs market and record high levels of consumer confidence. Interest rates could go up if this continues throughout 2018.

That said, interest rates are still desirable right now, and it may be an excellent time for you to consider a refinance or new home purchase.

About the Author

David Reznikow is a loan officer atFairway Independent Mortgage. A Brookline native and BHS graduate, Reznikow is currently a Newton resident but has remained part of the Brookline community. As a Brookline Chamber of Commerce Director and business member Reznikow has had the opportunity to add to the vibrancy and diversity of the business community while helping to raise funds for local charitable organizations through many Chamber initiatives. Both Reznikow’s parents have businesses in Brookline, still live in the home where they raised three children, and can often be found playing with their grandson, Cameron, at Dean Park